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A boat burned down and its cargo was subsequently salvaged. The shipping company asked for additional payment from the people
who were supposed to get the shipment of the cargo (the consignees) for the salvage of the cargo. The charges were all paid b y
Phil Home Assurance. Phil Home Assurance, as subrogee of the rights of the people who were supposed to get the shipment, now
wants to seek reimbursement from the shipping company. Issue: Is Phil Assurance entitled to the reimbursement? SC says yes
they are. The fire occurred because of the negligence of the shipping company and its captain and crew. It stored a cylinder with
flammable substances close to the engine room, which is heat producing. This caused an explosion. And so, the fire was not a
natural calamity. Therefore, the liable one is the shipping company.
Eastern Shipping Lines loaded the following to boat SS Eastern Explorer in Kobe, Japan for shipping to Manila and Cebu,
(all with their corresponding Bills of lading):
o 2 boxes internal combustion engine parts, consigned to William Lines
o 10 tons (or 334 bags) ammonium chloride, consigned to Orca's Company
o 200 bags of Glue 300, consigned to Pan Oriental Match Company
o Some garments, consigned to Ding Velayo
While the boat was in Okinawa, a small flame started on the “acetylene cylinder” in the accomodation area near the
engine room.
As the crew tried to extinguish the fire, the “acetylene cylinder” suddenly exploded, causing fire in the accommodation
area.
Death and severe injuries happened. The whole boat was on fire. This forced the master and the crew to abandon ship.
Thereafter, the boat was found to be a constructive total loss and its voyage was declared abandoned.
After several hours, a tugboat arrived near the boat and towed the boat for the port of Naha, Japan.
Fire fighting operations were again conducted at the port. After the fire was put out, the cargos which were saved were
loaded to another boat for delivery to Manila and/or Cabu.
Eastern Shipping charged the consignees some amounts corresponding to additional freight and salvage charges,
The charges were all paid by Philippine Home Assurance Corp under protest.
Phil Assurance, as subrogee of the consignees, filed a complaint in RTC-Manila against Eastern Shipping to recover the
sum paid under protest.
Phil Assurance says:
o The charges were actually damages directly brought about by the fault and/or breach of contract of Eastern
Shipping.
Eastern Shipping says:
o That it exercised the diligence required by law in the handling of the shipment;
o That the fire was caused by an unforeseen event
o That the additional freight charges are due and demandable pursuant to the Bill of Lading;
o That salvage charges are properly collectible under the Salvage Law.
RTC dismissed Phil Assurance’s complaint.
CA affirmed.
In the SC, Phil Assurance questions the finding of the RTC and CA that the fire was a natural disaster.
Held: Yes.
Ratio:
(First, the SC says the assignment of errors by the petitioners in this case by raising the case to the SC are challenges to
findings of fact. And it is well settled that this Court is not a trier of factsblah blah blah…)
o Second, Eastern Shipping should have known that by storing the cylinder in the accommodation area for
passengers, it unnecessarily exposed its passengers to grave danger. Curious passengers, ignorant might have
handled the cylinder or could have smoked cigarettes while in the accommodation area.
o Third, the fact that the cylinder was examined and certified as having complied with the safety measures by
qualified expertsbefore it was loaded in the boat only shows that negligence was present in the handling of the
cylinder AFTER it was loaded and WHILE it was on board the ship.
Re: whether or not expenses incurred in saving the cargo are considered general average,
SC says yes. As a rule, general or gross averages include all damages and expenses which are deliberately caused in
order to save the vessel, its cargo, or both at the same time, from a real and known risk.
While this case may technically fall within general averages, the formalities prescribed under Article 813 and 814 of the
Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were NOT
complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the
occurrence of the average turns to naught.
In conclusion:
Cargo consignees cannot be made liable to Eastern Shipping for additional freight and salvage charges.
Eastern Shipping must refund to the insurer, Phil Assurance, the amount it paid under protest
Judgment reversed.